6-K 1 enia20190305_6k.htm FORM 6-K enia20190305_6k.htm - Generated by SEC Publisher for SEC Filing

FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

For the month of February, 2019

Commission File Number: 001-12440

Enel Américas S.A.
(Translation of Registrant’s Name into English)

Santa Rosa 76
Santiago, Chile

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F:

Form 20-F  [X]   Form 40-F  [   ]

Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes    [  ]      No    [X]

Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes    [  ]      No    [X]

Indicate by check mark whether by furnishing the information
ontained in this Form, the Registrant is also thereby furnishing the
information to the Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Yes    [  ]      No    [X]

If °;Yes” is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): N/A


 
 

 

SIGNIFICANT EVENT

Enel Américas S.A.

Securities Registration Record No. 175

 

Santiago, March 1, 2019

Ger. Gen. No. 35/2019

 

Mr. Joaquín Cortez Huerta

Chairman

Financial Market Commission

Avenida Libertador Bernardo O’Higgins N°1449

 

  Ref. SIGNIFICANT EVENT SUPPLEMENT

 

 

To whom it may concern:

 

Pursuant to Ordinary Resolution No. 6244 of the Financial Market Commission, dated February 28, 2019, we supplement the Significant Event filed on February 27, 2019 with the following information:

 

1. Amount or percentage of the capital increase that will be used for investment opportunities through merger and acquisition transactions and acquisitions of minority interests.

 

The proceeds raised through the proposed capital increase will be used as follows:

 

    US$ 2,650 million will be used to provide funds to the subsidiary Enel Brasil S.A. through a subsequent capital increase in the latter and/or through one or more loans to it, in order to enable Enel Brasil S.A. to repay a loan provided by Enel Finance International N.V., which replaced debt of Enel Brasil S.A. with banks, associated with the acquisition of the Brazilian company Eletropaulo Metropolitana Eletricidade de Sao Paulo S.A. (Eletropaulo).   

 

    US$ 850 million will be used to restructure the liabilities of Eletropaulo’s pension funds and for the reduction of contingent funds or provisions for litigation in Brazil.

 

Because of this, it is not contemplated that the proceeds raised through the capital increase would be used in potential merger and acquisition transactions or acquisitions of minority interests, but upon completion of this capital increase we will be positioned to take advantage of investment opportunities by strengthening the balance sheet of Enel Américas S.A.

 

2. Type of merger and acquisition transactions and acquisition of minority interests to which the Significant Event refers.

 

In the context of the purpose of the capital increase indicated in the Significant Event filed on February 27, 2019, this transaction would grant Enel Américas S.A. a financial position that would allow it to issue debt to finance merger and acquisition transactions and acquisitions of minority interests. The potential merger and acquisition transactions and acquisitions of minority interests that would be evaluated are the following:

 

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    Acquisition of minority interests in any of the current subsidiaries of Enel Américas S.A., which as of today represent opportunities for up to US$ 2 billion.

 

    Eventual acquisition of companies engaged in the electricity business in the markets where Enel Américas S.A. participates through its subsidiaries (Argentina, Brazil, Colombia and Peru).

 

3. What would be the restructuring of liabilities of the pension funds and reduction of contingent funds in Brazil.

 

Restructuring of pension fund liabilities: Eletropaulo sponsors additional retirement and pension benefit plans for its current and former employees and their beneficiaries, with FUNCESP being the entity responsible for administering said benefit plans.  FUNCESP is Brazil's largest private pension fund (the fourth largest, including government-controlled pension funds), is multi- funded and manages assets of approximately US$ 7.5 billion for about 50 thousand people, of which 17 thousand people relate to Eletropaulo.

 

The main pension fund risks that impact Eletropaulo are related to discount rates, mortality table and expected rates of return on assets. The actuarial obligations as of December 31, 2018, were US$ 3.3 billion and the deficit was US$ 1.0 billion.

 

In order to verify the impact on the actuarial liabilities, the following table illustrates a sensitivity analysis of the actuarial assumptions, considering a variation of +/- 0.25% in the discount rate.  The quantitative result as of December 31, 2018 is presented as follows:

  

Sensitivity

Discount rate

 

+ 0.25%

-0.25%

Impact on defined benefit

-0.07 B US$

+0.07 B US$

Total defined benefit obligation

3.2 B US$

3.3 B US$

 

If current plan’s conditions are maintained without modification, the deficit is expected to grow because of the increase in life expectancy and/or the reduction of the discount rate of pension fund liabilities.  In order to mitigate this exposure, Eletropaulo has developed a voluntary migration plan from the Defined Benefit plans that Eletropaulo currently has to Defined Contribution plans, mitigating the risk of an increasing deficit because of the future actuarial assumptions, and the eventual restructuring of the debt contracts of Eletropaulo with FUNCESP.  This plan should be evaluated by competent bodies in the coming months. 

 

Contingent funds or provisions for litigation in Brazil:  The distributors controlled by Enel Américas S.A. in Brazil, through Enel Brasil S.A. - Eletropaulo, Enel Distribuicao Rio, Enel Distribuicao Goias and Enel Distribuicao Ceará - have approximately 70 thousand litigation matters as of December 2018.  In the balance sheets of these companies, US$ 600 million are provisioned.  According to Brazilian rules, most of these liabilities are subject to increase at a rate of 1% monthly over the inflation index, generating an excessive financial burden, and therefore reduces significantly the net result of the companies and distribution of dividends to the shareholders, draining the cash flows of the companies.

 

Based on the use of "analytics" on the behavior of the active parties in mass litigations, a system capable of identifying potential agreements with these active parties is being implemented, and, for future cases, to avoid new litigation.  This plan requires funds for US$ 150 million, which will be used for the management of agreements and the implementation of technological platforms.  This would provide an initial expected benefit of a 30% reduction in the amount of the provisions, and a reduction in the volume of new litigation based on the pilot program last implemented in 2018.

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4. Financial effects that the aforementioned capital increase could have.

 

The following financial effects are expected as a consequence of the proposed capital increase:

 

    Improvement of the profit and cash flow of Enel Américas S.A.:  as Enel Brasil S.A.’s debt with Enel Finance International N.V. is repaid, the restructuring of the pension funds liabilities and the reduction of contingent funds or provisions for litigation in Brazil, the financial burden would be considerably alleviated, which would imply a lower financial expense and therefore a higher profit and an improvement in cash flow, both in Enel Brasil S.A. and in Enel Américas S.A., which consolidates the former.

 

    Higher dividends to be received in Enel Américas S.A.: by increasing Enel Brasil S.A.’s profits and improving its cash flow, this would increase its dividend distribution, which would allow Enel Américas S.A. to receive higher dividends.

 

    Greater credit capacity: as the level of debt decreases, Enel Américas S.A.’s credit indicators would improve considerably, which would allow greater flexibility to raise debt in the financial markets.

 

5. Any other information that is considered relevant for the adequate understanding and evaluation of the Significant Event.

 

In order to complete other information that we consider relevant for a better understanding of the transaction, we point out that on February 27, 28 and March 1, the 3 international credit rating agencies that cover Enel Américas S.A. as well as a local credit agency, published their corresponding press releases analyzing the transaction.

 

The aforementioned rating agencies are the following:

 

- Internationals: Standard & Poors, FITCH Rating and Moody's.

- National: Feller Rate

 

There was unanimity of the 4 credit rating agencies in qualifying this transaction as "credit positive" for Enel Américas S.A. highlighting, among other things:

 

    "Proposed capital increase of up to USD3.5 billion is a positive credit and will help solidify its investment grade rating"

 

    "Once completed, the transaction is likely to have an overall positive impact on Enel SpA's and Enel Americas' credit metrics"

 

    "Enel Americas' Potential $ 3.5 Billion Capital Increase Is Consistent With Its Aim To Maintain Strong Financial Profile"

 

    "We consider the proposed transaction to be a favorable development for Enel Americas' credit quality because it should strengthen the company's short-term credit metrics"

 

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    "Proposed capital increase is credit positive for Enel Americas as it will reduce leverage"

 

    "This injection of funds is positive for the company, especially for the subsidiary Enel Brasil S.A., which would result in greater efficiencies and a deleveraging of the financial profile".

 

For more information, attached are the 4 press releases mentioned above.

 

Yours sincerely,

 

 

 

 

AURELIO BUSTILHO DE OLIVEIRA

Chief Financial Officer

Enel Américas S.A.

 

 

 

 

 

 

 

c.c.:      Banco Central de Chile (Central Bank of Chile)

            Bolsa de Comercio de Santiago (Santiago Stock Exchange)

            Bolsa Electrónica de Chile (Chile Electronic Stock Exchange)

            Banco Santander-Chile - Representante de los Tenedores de Bonos (Bondholders’ Representative)

            Depósito Central de Valores (Central Securities Depositary)

            Comisión Clasificadora de Riesgos (Risk Classification Commission)

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  Enel Américas S.A.
   
  By: /s/  Maurizio Bezzeccheri 
  -------------------------------------------------- 
   
  Title:  Chief Executive Officer 

Date: February 5, 2019